32nd Annual R&D Survey

May 15, 2003

Food companies are not only trimming fat from their products these days, but also from their payrolls.

Just ask anyone working in food R&D. We did, and responses to FOOD PROCESSING’S 32nd Annual R&D survey, which was circulated among the R&D staffs of the nation’s 100 largest food and beverage companies, confirmed that many R&D departments are indeed running leaner and meaner, despite the extra servings that have been heaped on their work plates.

One respondent, who works for a confectionery company and who requested anonymity, noted that the number of new products her department was asked to develop last year doubled, even though the department’s staff size remained essentially the same. "It creates more work," she acknowledges, "which means you really have to learn to prioritize." As another respondent — an employee of a prominent soup maker who also requested anonymity — puts it, "The days of putting a product out there that lasts for 20 years is over. Products these days have a much shorter shelf life." The pipeline, like the consumer, needs to be fed.

The good news is that many R&D teams are learning to operate more efficiently, either as a result of new training programs they have put in place or new organizational paradigms they have implemented. For instance, a full 85 percent of those surveyed indicated their R&D departments now employ cross-functional teams in product development.

In many ways, this year’s results only serve to confirm some of the trends identified in previous years’ surveys. Last year, for instance, about two-thirds of respondents indicated that the number of new products their departments had under development increased during 2001. This year, a full 64 percent reported the same for 2002. What’s changed, in many cases, are staff levels.

Last year, some 22 percent of respondents noted that the number of full-time employees on their R&D teams declined in 2001. And in 2002? Nearly one-third of respondents reported declines. Although such reductions are customary when project loads ease, many of this year’s respondents indicated that staffs were reduced even as project loads increased. Among those respondents reporting an upswing in new product development work, some reported staff reductions in the ranges of 5 to 10 to 20 percent. All told, companies reporting an increase in product development work saw such activity rise by an average of 35 percent. By comparison, staff increases among the same group averaged only 11 percent. Meanwhile, respondents indicating no change in product development activity during 2002 also reported staffing declines — by an average of 5 percent.

Tighter timelines At the same time, food companies are seeking to reduce the time required to launch new products. Last year, a mere 1.5 percent of respondents reported concept-to-launch times of three months or less. This year, that number rose to 5 percent. That’s still a relatively small percentage, but survey results nonetheless indicate that concept-to-launch times of a year or more are on the wane.

While many R&D teams are employing cross-functional training to meet these challenges, it’s worth noting that the term has come to mean many things to many food companies. Depending on the source, cross-functional training may refer to "presentations made by various R&D members to promote a better understanding of that particular member’s expertise," or a full-fledged reorganization that puts key functions in closer proximity to one another. In some instances, these reorganizations embrace functions outside of R&D’s traditional purview, as happened with the prominent soup maker, which combined research with certain sales and packaging functions.

Archer Daniels Midland Company (ADM), which offers the dual perspectives of processor and supplier, has not only reorganized its R&D departments, but encouraged members "to provide seminars to other employees on how various expertises relate to each other," says Charles Morris, manager of research for ADM Arkady in Olathe, Kan. Different ingredients, he elaborated, are now grouped according to related customer bases, such as baking. The reorganization made sense, he says, "since, in the case of baking, we literally supply everything but the water and the yeast. We have experts in leavening systems, protein systems, flour systems...The thinking was that centralization would make it easier for us to function as a problem solver rather than just a supplier."

As such, R&D members within each group routinely conduct seminars for other staffers "so that everyone has a clear understanding of how that particular function relates to baking," Morris relates. "Their responsibilities may be different, and they may be involved in a different branch of ingredients than I am, but the point is that if I need information on a particular leavening agent, I know exactly who to call. It enables us to deal with our customers more effectively. Many of them have seen substantial cutbacks in their research departments."

Supplying assistance Don’t they know it. As a result, R&D teams rely on assistance from ingredient suppliers more than ever. In fact, nearly two-thirds of respondents this year indicated that suppliers are playing a greater role in product development than in years past; in nearly half of these cases, R&D has formed project teams comprised of multiple suppliers, principally as a means of controlling costs, improving product quality or developing product prototypes. (To a lesser degree, these teams are also used to assist in package design, shelf life improvement and the development of healthy products.)

"Supplier performance — their response time and technical competence — can make or break a project, now that our own staffing is thinner," notes the employee of a dairy producer. Another R&D staffer, this one from Perdue Farms, adds that supplier assistance has become crucial "to the commercializing [effort] and getting product quickly into the marketplace."

Food companies are more than willing to return the favor. "Suppliers who offer assistance are the ones who get first crack at new opportunities and are also highly likely to get the business — just because of their exceptional service," says a ConAgra employee.

And what product types account for the lion’s share of R&D’s development efforts? Line extensions accounted for 40 percent of activity in 2002, as compared to 48 percent in 2001. Reformulation work fell from 31 percent to 23 percent during the same period, while new product development rose from 22 percent to 33 percent. Particular product types under development understandably vary from sector to sector, but respondents nonetheless provided insight into some of the larger issues shaping their efforts.

Among the most frequently cited issues were consumer obesity and the growing demand for convenience foods — arguably flip sides of the same coin in many cases. Along with obesity and convenience, healthy foods were cited most frequently as the most important trend impacting new product development.

Not surprisingly then, the majority of respondents also indicated they are spending more time on developing healthy foods. Although respondents ranked "ethnic" as the single hottest food category over the next five years, a full six of their predicted top 10 "hottest" involve consumer health in one form or other. Among the health-oriented products respondents deemed hot: fortified foods; functional foods; low-fat foods; reduced-calorie foods; fat-free foods; and low-sugar foods. (Interestingly, low-sodium, organic and vegetarian foods, all highly touted categories, didn’t rank as highly.)

Along with healthy and ethnic products, respondents reported they are spending more time implementing packaging changes, developing environmentally friendly packaging and working with analytical instrumentation. On the other hand, they indicated they are spending considerably less time on line brand extensions; process automation; on-line analysis and biotechnology.